Ethically. I'm ok. This is because a mortgage has pre-arranged clauses in the contract that outline what the exit criteria are for the bank and the borrower. It's a contract with a pre-negotiated process around a divorce. A prenuptual if you will. In this case, we are just choosing to execute one of the clauses in the contract, as any business has the right to do. So, there is nothing unethical about adhering to the contract.
Morally. There are concerns about short sales and foreclosures bringing down property values in the neighborhood. And that is an overall market affect. And there is a concern that this action brings down the overall market. It's the same as what happens when the stock market has a sell off - every time a stock is sold in repeating fashion, the overall value of the market declines as there is more cash on the side. Morally, I am personally ok, because the expectation with me and my fellow neighborhood residents was that we were all seeking asset appreciation, and when that didn't occur, there was an understanding that we may all have to pursue options to rectify the situation. I was open with my peer group about that 5 years ago when first buying the property. If I had lied about my intentions, it would be a different story.
Also, and I forgot to mention this. In both of our cases, we have changed our job situation such that it is not profitable on a monthly basis to continue paying our mortage and there is no refinancing situation that makes it profitable. And we both explored conversion to rentals. We'd be in a situation where monthly, we were expending nearly 3K / month in losses if they were both rentals.